Former Governor Peter Obi has identified mismanagement of borrowed funds, which he called borrowing for consumption, as a serious threat to Nigeria’s economic survival.
Obi stated this on Sunday on Njenje Media TV.
He explained that borrowing, in itself, is not bad, but however, noted that the mismanagement of borrowed funds was part of the reasons Nigeria had not only retrogressed but mortgaged the future of generations to come.
Obi lamented that Nigeria’s government, over the years, have failed to invest all the funds borrowed from different sources, pointing out that more saddening was the number of financial resources that went into debt servicing.
“For every N1 we borrowed, 80kobo was spent servicing the loan. One looks around in the country, and there is no development that justifies the funds borrowed over the years. If the funds borrowed were invested in the critical areas of development, that is education, health and poverty alleviation, Nigeria would have developed beyond what it is today,” Obi said.
He continued: “There is nothing wrong with borrowing. What we need to do is to put a law in place that if we must borrow, it must strictly be for investment in areas of growth. Many countries have built robust economies with borrowed funds. We can do the same if only we commit to the development of our nation.
“In 2010, Bangladesh had a GDP of $115 billion. Their per capita income was $780, while their debt stood at $41 billion, about 36% of their GDP. As of the year 2020, Bangladesh’s GDP had risen to $325 billion, while their per capita income is above $2000, with their debt standing at $115, which is still 36% of their GDP. This shows that in a period of 10 years, their GDP has increased, their per capita income tripled and their debts grew.
“What the above implies is that a country like Bangladesh borrowed funds for investment. Today, the small scale business sector of the country is growing and exporting textile materials to the UK. Their diaspora remittances today is about $25 billion. This goes to show that they invested in educating their people too.
“The above is in contrast to Nigeria, whose GDP was $351 billion in 2010, per capita was $2 250 while the debt stood at about $40 billion, some 14% of our GDP. By 2020, Nigeria’s debt had tripled to well over a hundred billion dollars. Our GDP only grew by 10% while the per capita income reduced to less than $2000.
“Thus the borrowed funds meant to pull our people out of poverty threw more people into poverty, doubled the unemployment rate and so on. It is therefore obvious that the borrowed funds in Nigeria, over the years, were not properly managed,” Obi concluded.
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